Brazil CNG sales break record in Sept

Brazilian compressed natural gas (CNG) sales reached a record 6.25mn m3/d in September as more motorists shift away from gasoline and hydrous ethanol.

Brazil's natural gas distributors association (Abegas) is projecting that 150,000 vehicles will be converted to use CNG this year, up from 127,000 vehicles in 2017.

For Marcelo Mendonca, the head of strategy at Abegas, the turning point for the industry came when Brazilian state-controlled Petrobras adopted a market-based fuel pricing policy in October 2016, which allowed CNG to compete head-to-head with gasoline and ethanol.

September CNG sales rose by 12pc from 5.51mn m3/d in September 2017. In the first nine months of 2018, CNG sales averaged 5.92mn m3/d, up from 5.29mn m3/d in the same period of 2017 and 4.87mn m3/d in the 2016 period, according to the mines and energy ministry's monthly gas report.

In the first three weeks of November, the price of a cubic meter of CNG is on average 35pc cheaper than a liter of gasoline. Cars can typically travel further with a cubic meter of CNG than with a liter of gasoline.

Mendonca said a truckers´ strike in May triggered a 100pc increase in demand for CNG conversions. Currently, Brazil has roughly 2mn cars that can run on CNG, still a fraction of the country's 68.5mn light vehicles.

During the 11-day strike, gasoline, diesel and ethanol supplies were disrupted because these fuels are mostly distributed by truck, whereas CNG is transported by pipeline, leaving it immune from the effects of the strike.

Mendonca also sees significant potential to convert trucks and buses, which would help reduce emissions and Brazil's dependence on imported diesel. But CNG-fueled heavy vehicles are not produced in Brazil because there is still no demand for it.

Brazil plans to increase domestic gas flows as more pre-salt fields come on stream, said Mendonca, adding that if there is no firm domestic market, much of the additional production will be reinjected, calling that a "huge waste."

To continue to expand the overall domestic gas market, Mendonca highlighted the need to resolve several regulatory issues, including pipeline access.

While the current government has been working to pass new gas legislation, the window to approve a long-delayed bill this year is closing. A new government takes office on 1 January 2019.

Abegas recently submitted a gas proposal to president-elect Jair Bolsonaro that would boost consumption and market transparency as Petrobras withdraws from its dominant position in the sector.

Abegas estimates that with right regulations, investments in the sector could reach $32bn in coming years.